Discussion

Thanks @daveambrose. Hello Hunters! Knock offers a radical new way to sell a home quickly without risk and uncertainty. Homes are our largest purchase and most valuable asset, but they are also the most difficult and expensive to buy and sell. 2.5 million home buyers a year must sell their current home quickly to get the down payment and mortgage for their new home. If they don't sell in time they lose the new home to another buyer, lose their kids' place at a new school, job opportunities and deposits, to name a few. Knock guarantees homeowners that we can sell their home in less than 6 weeks or we buy it ourselves for market price. We guarantee homebuyers that our homes are rock solid with our 200-point home-inspection, certification and extended warranty. Knock uses data science to price homes accurately, technology to sell them online quickly and a dedicated team of professionals to guide you every step of the way.

Thanks @sbyrnes! The data science that determines the market price is part of our IP. We obviously put a lot of resources into automated valuation models (AVMs) at Trulia and Zillow (aka the Zestimate). But those models are limited by the fact that they never put eyes on the property. At Knock, we do an in-person inspection of every home that provides 200 proprietary data points never before used to price homes. If our algorithm is wrong we buy the property after 6 weeks, so we are very motivated to make it world class:-)

Cool to see another competitor to Opendoor in the market, w. Knock focused first on the greater Atlanta metro area. Buying and selling a home is one of the most frustrating and time-intensive processes in our lives, so services like these are really fantastic for consumers.
I was a huge fan of @seanblack's Crunched platform for sales teams a few years ago but looks like he's getting back into real estate w. Knock alongside @jamieglenn.

@sam__cash I think you mean OpenDoor, as Nextdoor is the social network. First, Knock pays to promote your home on the open market for 6 weeks to attract multiple offers and maximize your price. This gives the seller confidence they got the highest price possible driven by the market, not us. This ensures we are aligned with the sellers' best interest. With Opendoor you can only consider their price in isolation without running a competitive process that oftentimes drives the price higher. Opendoor ultimately takes 15-20% of the sale price in order to buy the house outright: 6% Service Cost, 3-6% Market Risk Charge and they purchase the home 5-10% below the price they ultimately sell it for if you look at public records. We charge a flat 6% success fee, equal to the traditional listing commission. Most homeowners aren't so desperate to sell that they need to give up 15-20% of the value of their home. Most homeowners just need a guaranteed price and sale date for their home so they can make an offer a new one, put deposits down on schools, furniture, the moving truck etc without worrying their house won't sell in time. We believe the current cost of selling a home is already way too expensive. But we are offering a lot more convenience and certainty than traditional listings while building the technology necessary to put this incredibly laborious, inefficient and mostly offline process completely online and make it as automated as possible. As we do, we will attack more of the cost of selling a home at every point in the transaction.

@seanblack founder of Opendoor here. This is not true. Our average total service charge is 8.5% with over 1/3 of our homes having 6-7% total fees, and that proportion is increasing. On top of that, we don't offer below market price (we track very closely). Our resale delta you cite is likely accounted for in repairs and upgrades we invest.

@justindross we are actually going by public record data, which doesn't jive with the numbers you mentioned or publish on Opendoor.com. Public records show Opendoor selling homes for a pretty decent premium above the price at which it buys them from homeowners. It's only fair to assume that homeowners are giving up the difference.

@seanblack good to clarify. There are a few possible explanations besides "homeowners leaving money on the table" - first, about 25% of our homes are purchased with 0% service charge or market risk (no fees) and the acquisition headline price will be 6-9% below valuation instead. If there's any remaining skew after that beyond roughly our repair and reno cost invested, it doesn't show up in our data. Arguably we benefit from market appreciation in edge cases, but that's very small.
We also track the ultimate sales price of homes that get offers from us then list on market instead and we feel good about those numbers too. On top of that, we backtest our model on hundreds of thousands of sales, and it has a 0% average bias.
Nobody builds a great business by lying or screwing people, and nobody at Opendoor would work here if low-balling people was any part of the business model.

@benbowdene@daveambrose See my response to @sam_cash above on Opendoor. As for Redfin, they built their brand, infrastructure and cost structure over the last 16 years around being a discount brokerage. It would be difficult for them on multiple levels to operate two models at the same time. This a massive, $1.3T industry with 5M people buying/selling homes each year under different circumstances. There is room for different innovators offering different value props to different segments of the market. This is not a winner take all or even winner take most market. It is just too big and nuanced.

@seanblack@daveambrose@sam_cash I understand people want different options, but I believe it could be a huge shift in how people buy and sell homes which would allow you or someone similar to take a majority of the market. If you provide a superior experience from a cost and length to sell/buy perspective, then there's no reason everyone wouldn't at least go to you first to see what they can get for their home. Redfin could "easily" pivot since most of their real estate agents aren't on contract and rather are full time. Which is why they might one day shift into the ring if the business model is working out, especially since they have the capital and users to do so. Love the business Sean, will be watching quite regularly on the sidelines :D, love the real estate market, it's rather exciting!

I agree @2phu if we are in a downturn there can be no guarantees made to purchase back within a six week timeframe otherwise the only guarantee will be to lose money on the purchase. I think this model is extremely high risk you do not want to be holding falling real estate on your balance sheet in a bubble.